Trump’s Policies and the Future of Electric Vehicles
Former President Donald Trump’s administration declared its intention to eliminate what it called the “electric vehicle (EV) mandate” and promote “true consumer choice.” The plan involved terminating regulations and subsidies that, according to Trump, made EVs too accessible compared to gasoline-powered cars. This stance could hinder efforts to decarbonize cars and trucks, a crucial step in reaching global net-zero emissions targets.
Road transportation contributes significantly to climate pollution, accounting for 12% of global and 22% of American emissions. Electric vehicles offer a climate-friendlier alternative, producing far lower emissions due to their efficiency. As power grids transition to cleaner sources like solar and wind, the environmental benefits of EVs will only increase.
Global EV Sales Surge
Global EV sales have risen substantially as prices have fallen and governments have adopted policies to encourage their use. In 2024, the number skyrocketed to over 17 million, accounting for more than one in five new passenger cars sold worldwide. However, the sales growth was uneven.
China dominated the market, selling 11 million EVs and plug-in hybrids, a 40% increase from the previous year. This accounted for almost two-thirds of global sales. Europe followed, with 3 million new EVs, but sales declined by 3% due to the expiration of some incentives. North America accounted for 1.8 million vehicles, experiencing a modest increase of 9% in 2024. The rest of the world saw rapid growth, with a 27% increase in EV sales.
The International Council on Clean Transportation projects that climate pollution from road transportation will peak this year, largely because of EV adoption.
The Trump Administration’s Impact on U.S. EV Sales
The Trump administration is targeting regulations and government incentives that support EV adoption. The National Highway Traffic Safety Administration’s Corporate Average Fuel Economy (CAFE) standards, which require automakers to meet fuel efficiency targets, are amongst those targeted.
Following Senate confirmation as the new Secretary of Transportation, Sean Duffy signed an order to “review and reconsider” all CAFE standards. The Environmental Protection Agency (EPA) also published stringent average vehicle tailpipe emissions standards. Because EVs have no tailpipes, increasing EV sales is the most straightforward way for automakers to meet these standards.
The House of Representatives voted to repeal this rule and bar the EPA from imposing future vehicle pollution regulations, but the Senate didn’t take up the bill. The EPA also issued California with two waivers in December, allowing the state to set more stringent vehicle pollution standards and to require that an increasing share of new in-state passenger vehicle sales be EVs and plug-in hybrids, reaching 100% by 2035. Thirteen states plus Washington D.C., who together with California account for more than one-in-five new U.S. passenger car sales, have adopted California’s EV mandate. The aforementioned executive order called for “terminating, where appropriate, state emissions waivers that function to limit sales of gasoline-powered automobiles.” During the last Trump administration, the EPA revoked California’s waiver in 2019, and California sued. The Biden EPA reinstated the waiver in 2021 before the lawsuit had been resolved.
Many automakers cannot sell enough EVs to comply with regulations, requiring them to purchase credits from companies with excess EV sales, like Tesla. E&E News reported that nearly one-third of Tesla’s profits have come from selling these credits, and Tesla previously lobbied to preserve California’s programs.
The Inflation Reduction Act includes federal EV subsidies up to $7,500. Although the order calls for their elimination, only Congress can modify the tax code. The tax credits can also be transferred to participating auto dealers, who can then immediately reduce the sales price.
Many Congressional Republicans have called for the elimination of the EV tax credits. But their made-in-America requirements have spurred hundreds of billions of dollars of investments in domestic battery and EV manufacturing supply chains, predominantly in districts represented by Republicans in the South and Midwest.
One recent paper estimated that eliminating these tax credits would reduce U.S. EV sales by around 20% between now and 2035, which could imperil many of the jobs and local tax revenue generated by those manufacturing facilities.
Regardless of policy changes, experts predict the EV share of new U.S. passenger car sales will continue to grow. However, growth slowed in 2024 as more Americans opted for traditional hybrids. Cox Automotive projects a modest rise in the EV and plug-in hybrid share in American car sales, with standard hybrids also making up a significant portion of the market.
Tesla’s Decline and China’s Ascent
Tesla’s vehicle sales fell last year for the first time since 2011. Tesla still held 48% of new U.S. EV sales in 2024, down from previous years. Some of this decline may be linked to Elon Musk’s controversial reputation. In a survey by Electrifying.com, nearly 60% of potential EV owners said Musk’s reputation discourages them from buying a Tesla.
Globally, Tesla has been a leader in fully electric car sales, but Chinese automaker BYD is poised to surpass them. BYD additionally sells substantial numbers of plug-in hybrids, a vehicle type Tesla doesn’t offer.
Chinese EVs have been kept out of the U.S. auto market in part due to a 100% tariff. But China has rapidly adopted EVs, with half of its new passenger car sales being electric, and its EV exports have grown.
Factors Determining EV Adoption
Studies have identified insufficient public charging infrastructure and cost as key barriers to widespread EV adoption.
The Trump administration is attempting to freeze funding for the National Electric Vehicle Infrastructure Program. These studies also found cost to be a major barrier to EV adoption.
In the U.S., although EV sticker prices remain somewhat elevated, “in most states, financing and owning an EV is cheaper on a monthly basis than financing and owning an equivalent gasoline car.” That’s aided by the fact that, fuel and maintenance costs for EVs are about $1,000 per year lower than gasoline-fueled equivalents.
While more automakers plan to introduce affordable EV models, the potential repeal of EV tax credits could hinder adoption in the United States, potentially allowing China to gain further leadership in this vital clean technology sector.
